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KPI Article
Insights
Article
9 Min Read

Evaluating Market Share as a KPI

What Is Market Share and What Does this KPI Mean to Convention Centers?

In business, market share measures the amount of the market controlled by a single company. It indicates how a company is doing within a given industry. For most companies, increasing market share is a strategic goal. Not only does high market share mean that a company is doing more business, but it also influences the way investors perceive that company. Investors normally view market share increases and decreases carefully because they signify relative competitiveness. A declining market share is often viewed as undesirable from an investment standpoint, whereas market share growth indicates a company's overall strength.

Some in large businesses where for instance a product or service is sold nationally rely on absolute market share as a KPI. Absolute market share shows how a company is faring in terms of all its competitors. For an outside investor, it enables them to evaluate a company's performance in the context of a larger market. It's one thing for a company to report sales figures on their own, but presenting those figures in comparison to other companies in the same industry paints a much broader picture.

In the convention center world, absolute market share is often cited and used in feasibility studies. This distorts its importance however because it is not that meaningful to the vast majority of convention centers. In this context, market share leadership among convention centers is most likely in the low single digits. There is simply no way to track the diverse type of events that play in convention centers to make this metric useful. It is only when segments of the market are measured that using market share as a KPI is meaningful. In some instances, the measurement will have geographic limitations since many events rotate to different regions each year and the competition therefore is regional. This measure is sometimes called relative market share, and it can be used to show market share among regional competitors and/or market share among competitors for a particular market segment. Relative market share offers insight on how to identify and outperform specific competitors. Additionally, it's helpful to calculate relative market share on an ongoing basis to see whether your convention center is enhancing its position within the industry or increasingly falling behind the competition.

What to do if you’re losing market share:

So your convention center has been consistently monitoring relative market share and the decline is obvious. The majority of convention centers will analyze their market position and conclude that they are operating below their optimal market share. Maybe they have not been able to craft an effective marketing campaign, or the most common response; they are not as large as their competitors in order to attract the biggest and best events. In sum, they see themselves in a much more competitive position promising a higher market share, followed by greater economic impact if only…….. The expansion option appears to be the only way and it seems to be an almost knee-jerk reaction to bad news. Convention center expansion is a time-consuming, politically controversial and expensive option. However, convention centers have other tools and opportunities, though not as many as private companies, to improve market share. Listed below are the tools that private companies often employ with commentary on how they may apply to convention centers:

  • Strategic Acquisitions - Acquiring a competitor is recognized as the most rapid method for private companies to gain market share. Convention centers do not have this option.
  • Innovations which Differentiate from Competitors - Private companies trying to improve market share often rely on technical innovation which differentiates their products and services from competition. Many convention centers are on this track, making civic improvements and incenting private industry to invest in hospitality related businesses. The more creative ones are incorporating these things into convention center districts. Other convention centers have upgraded their wireless internet capacity and coverage, made significant changes in food & beverage service and improved the amenities and space for meeting rooms and ballrooms.
  • Innovative and Thoughtful Marketing – Sometimes the marketing message lacks clarity; the marketing “call to action” to attract tradeshows and professional association meetings doesn’t quite fit the traditional view of the city. There was a time for example when Orlando and Las Vegas were not considered serious places to conduct business. Clearly, all that has changed, so a concerted, innovative and thoughtful marketing effort initiated by a convention center in partnership with the CVB can work. Altering the message and ultimately changing perceptions about a city and its convention center takes persistent work. There is, in fact, a discipline to altering perceptions especially in regard to media coverage. From the Harvard Business Review:

First, the company has to land and remain on the public’s radar screen, which involves staying above what we call the “awareness threshold”: a minimum number of stories mentioning or featuring the company in the leading media. This volume, which must be continual, varies somewhat from company to company, depending on industry and country but not on company size.

Second, a positive reputation requires that at least 20% of the stories in the leading media be positive, no more than 10% negative, and the rest neutral. When coverage is above the awareness threshold and is positive overall, the company’s reputation benefits from individual positive stories and is less susceptible to being damaged when negative stories appear. If coverage is above the awareness threshold but the majority of stories are negative, a company will not benefit from individual positive stories and bad news will reinforce its negative reputation.All companies—large or small—should care about staying above their awareness threshold.

Third, managers can influence the mix of positive, negative, and neutral stories by striving to optimize the company’s “share of voice”: the percentage of leading-media stories mentioning the firm that quote someone from the organization or cite data it has provided.

Focus Marketing on Sectors with the Best Probability of Success

Another way to grow market share is to focus your efforts on clients where you have the best probability of success. Probability does not mean that something will not occur if the percent is very low or zero. It means that the chance of it occurring has a history of occurring at a certain percentage in the sample. Convention centers through in-depth research can find out past probabilities of success for certain economic sectors and in turn concentrate marketing and sales resources on those sectors or “verticals”. It may be enticing but focusing on a sector such as large medical association meetings or large religious conferences where there is no past history and therefore very low probability of success is a waste of resources. I would look back as far as accurate records allow; the more historic data the more accurate the probabilities will be. I would also try to obtain hotel records from their past events. Probabilities can be used as a predictive tool and can steer marketing efforts in the best direction.